Eurozone Says Greece Will Get Next Loan Installment

After weeks of worry, Greek officials were told Oct. 21 that a critical $11 billion loan installment as part of a $152 bailout to keep the country from going bankrupt has been approved and will be disbursed early in November, just in time to allow the government to keep paying workers and pensioners as cash was running out. Finance Ministers of the 17 countries of the Eurozone who use the euro as a currency agreed in Brussels to send the money Greece needs desperately.
“We have agreed to endorse the disbursement of the next tranche of financial assistance to Greece in the context of the current economic adjustment program,” said a statement from the ministers after they met with Greek Finance Minister Evangelos Venizelos. “The disbursement is expected to take place in the first half of November, pending the approval by the Board of the IMF,” it said, referring to the International Monetary Fund in Washington, D.C., which – along with the European Union and European Central Bank – forms to so-called Troika providing the funding to keep Greece alive economically.
Venizelos, also in a statement, said, “The Eurogroup decision about the Greek program and the sixth installment constitutes a positive step, coming as a result of the voting by the Greek Parliament of the bill that secures the fiscal targets of 2012 and lays the groundwork for the necessary structural changes.” He was talking about a new round of pay cuts, tax hikes and layoffs the administration of Prime Minister George Papandreou’s Socialist PASOK party rammed through the Parliament while protests were taking place.
Bloomberg had reported that the Troika’s report on Greece had suggested that the financial situation in the country “has taken a turn for the worse” since the last review in June, and would need more investor losses for the Greek debt to be sustainable. “Large, long-term and sufficiently generous official support will be necessary for Greece to remain current on its debt service payments and to facilitate a declining debt trajectory,” said the report. It recommended a larger contribution by the private sector, through a haircut – losses that banks and investors will take – may reach 60 percent ore to bring the debt down to 110 percent of the country’s gross domestic product. It is now approaching 150 percent and was expected to reach 182 percent without drastic measures.
The money will keep Greece afloat for a little longer, but most economists agree that the country also needs a substantial cut to its debt load. The finance ministers said they were looking at ways to do that, including imposing bigger losses on the banks that hold Greek bonds, Associated Press reported. If those debts aren’t reduced, Greece won’t be able to raise money on financial markets for another decade, according to a new report by the country’s international creditors.
The newspaper Kathimerini reported that the Troika will set up a permanent office in Athens, which could stoke fears that critics have long espoused, that Greece is ceding its sovereignty to foreign investors and giving up control of its economy. A Eurozone summit set for Oct. 23 is expected to ask for permission to base a headquarters in the city but so far Papandreou has done as he was ordered to do so by the lenders, including forcing through the austerity measures that have created a deep recession.
The newspaper said the decision was made because the Troika believed he could not meet further demands and reforms, especially privatization of Greek assets and collecting money from tax evaders costing the country nearly $40 billion a year in lost revenues. The plan provides for officials who will have the role of consultants to Papandreou and Venizelos who will have to take them under their wing and let them keep monitoring the country’s spending and finances.